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Chief Executive’s Review

Growth was strong on both the import and export sides reflecting the generally positive performance of the economy during the year.

Eamonn O’Reilly - Chief Executive Officer

Chief Executive’s Review

Dublin Port Trade Review

In 2017, volumes grew to 36.4m tonnes, an increase of 4.3% on the previous year.

Growth was strong on both the import and export sides reflecting the generally positive performance of the economy during the year.

‘000 gross tonnes

2017

2016

% change

Imports

21,546

20,745

3.9%

Exports

14,876

14,184

4.9%

Total

36,422

34,929

4.3%

Our business is increasingly dominated by the unitised modes which together account for 82.6%. A decade ago, they represented 78.5% of total gross tonnage.

‘000 gross tonnes

2017

2016

% change

Ro-Ro

23,412

22,484

4.1%

Lo-Lo

6,673

6,328

5.4%

Bulk Liquid

4,281

4,017

6.6%

Bulk Solid

2,034

2,053

(1.0%)

Break Bulk

22

47

(52.8%)

Total

36,422

34,929

4.3%

Unitised

30,085

28,812

4.4%

Non-unitised

6,337

6,117

3.6%

The major part of our growth of 1.5m gross tonnes in 2017 (85%) came in the larger unitised modes which grew by 4.4% while, the smaller non-unitised modes had a lower rate of growth at 3.6%.

2017

%

Unitised

1,273

85.3%

Non-unitised

220

14.7%

Total

1,493

100.0%

Looked at in terms of units for Ro-Ro and TEU for Lo-Lo, we saw strong growth in Ro-Ro in 2017 (+5.0%) and even stronger growth in Lo-Lo (+5.2%).

2017

2016

% change

Ro-Ro units

992,062

944,531

5.0%

Lo-Lo TEU

698,348

663,732

5.2%

Gross tonnes imports/exports (‘000)

Imports

Exports

Gross tonnes modes (‘000)

Ro-Ro

Lo-Lo

Bulk Liquid

Bulk Solid

Break Bulk

Trade Vehicle volumes were down by 4.6% from 104,185 units to 99,383 units reflecting increased importation of used cars from the UK as a product of sterling weakness during the year.

Within the Bulk sector, Bulk Liquid (which is virtually all petroleum products) increased by 6.6% while Bulk solid decreased by 1.0% driven in the main by reductions in the export of cement products.

The tourism side of our business showed modest growth with ferry passengers up 1.8% at 1.8m and tourist vehicles ahead 1.9% at 514,908 units.

Cruise tourism grew strongly in 2017 with 127 cruise calls during the year representing a 16.5% increase on the previous year.

2017

2016

%

Cruise calls

127

109

16.5%

Passengers and crew

210,050

159,124

32.0%

Aggregate gross tonnage

5,749,351

4,354,130

32.0%

Financial Performance in 2017

Dublin Port Company is an infrastructure provider with relatively little involvement in operational activities. As such, we have high operating leverage and expect to see volume increases directly driving revenue and profit levels.

During 2017, our 4.3% volume increase drove our revenues up by 4.7% from €81.6m to €85.5m.

Total operating costs in 2017 amounted to €40.9m representing a €4.3m (11.7%) increase on the previous year.

Depreciation costs increased by €0.4m from €8.6m in 2016 to €9.0m in 2017 reflecting the higher fixed asset base as a result of the Company’s on-going capital investment programme

Pension funding costs are €2.7m higher in 2017. The 2016 charge benefitted from a €1.9m past service credit following the application of the impact of the pension levy to active members of the fund while a past service charge arises in 2017 amounting to €0.5m

Payroll costs were €0.6m higher reflecting pay escalation arising in 2017 together with an increase in the average number of persons employed from 146 to 148

Other costs in 2017 were €0.6m higher by comparison with the previous year, mainly as a result of a €0.4m legal fees recovery settlement in 2016.

Other operating income arising in 2017 in the amount of €1.9m relates to an increase in the valuation of the Company’s investment property “P5” located in the Eastpoint Business Park amounting to €1.6m together with profit on disposal of fixed assets amounting to €0.3m. The comparative figure in 2016 was €0.5m comprised of €0.3m in respect of P5 and €0.2m in respect of profit on disposal of fixed assets.

As a result of the foregoing the Company’s operating profit increased by €1.0m (2.1%) from €45.6m in 2016 to €46.5m in 2017. Excluding the increase in pension funding costs (which were impacted by the past service credit in 2016), the underlying operating profit level increased by €3.6m (7.9%) on the previous year.

€’000

2017

2016

% change

Turnover

85,497

81,633

4.7%

EBITDA

53,625

53,642

0.0%

Operating Profit

46,512

45,554

2.1%

PBT

46,344

45,082

2.8%

PAT

40,575

39,040

3.9%

As an infrastructure provider with large imminent capital expenditure requirements, cash generation, Return on Capital Employed and net debt are key measures of our business strength.

EBITDA (Earnings before Interest, Tax, Depreciation and Amortisation) amounted to €53.6m in both years, (taking account of the deduction for the non-cash item related to the increased valuation in respect of the investment property P5).

€’000

2017

2016

Operating Profit

46,512

45,554

Depreciation

9,562

9,082

Amortisation

(542)

(475)

Other income

(1,600)

(350)

Exceptional Items – profit on disposal of assets

(307)

(169)

EBITDA

53,625

53,642

Beyond this, our Return on Capital Employed (ROCE) decreased from 13.9% in 2016 to 12.0% in 2017. This reflects the higher level of Capital Expenditure arising in 2017 and the long term nature of port infrastructural investment. Fixed Assets at year end totalled €418.2m compared to €330.0m at the end of 2016. The movement in Fixed Assets for the year is explained by additions of €96.2 together with an increase in valuation of the Company’s investment property amounting to €1.6m, offset by the depreciation charge for the year amounting to €9.5m. The Fixed Asset additions reflect a cash investment during the year in excess of €78m together with an additional €14m in respect of the completion of the land acquisition transaction in respect of the Dublin Inland Port Facility.

At year end our net debt position was €37.9m compared to a €3.0m net cash position at the end of 2016 again reflecting the high level of capital expenditure arising in 2017.

€m

2017

2016

Cash (including short term deposits)

€21.9m

€38.0m

Borrowings

(€59.8)

(€35.0m)

Net (Debt) / Cash

(€37.9m)

€3.0m

The Company has a €100m EIB long-term debt facility available (of which €25m was drawn down at year end) which, combined with medium term debt facilities of €50m (of which €35m is currently drawn), ensures that we are in a strong position to implement the continuing programme of essential capital investment in 2018 and beyond. With regard to full implementation of the Masterplan we have commenced discussions with various financial institutions with a view to putting appropriate funding in place to ensure delivery of our 10 year capital expenditure programme.

Events during the Year

Construction activities on a wide range of capital projects ramped up during 2017.

There was significant progress on the ABR Project, notably the commencement of the six year capital dredging campaign to deepen Dublin Port to -10.0m CD.

The first project at Dublin Inland Port (to construct an entrance and secure the perimeter) was completed during the year.

On the planning side, the Poolbeg West SDZ Planning Scheme was made by Dublin City Council in October 2017 and incorporated zonings compatible with the Masterplan 2012-2040. However, the planning scheme has been appealed to An Bord Pleanála and we await the outcome of this process.

The review of the Masterplan continued during 2017 and a clear vision is emerging that will see Dublin Port being developed to its full capacity by 2040 without further encroachment into Dublin Bay.

Outlook for 2018

A Strategic Environmental Assessment of the Masterplan Review will be completed during 2018 and it is planned to publish Masterplan 2040 by mid-year.

Allied to this, the Company is planning an accelerated capital programme which will see capital expenditure in the ten years to 2027 increase from the previously planned value of €600m to €1,000m. This creates a major financing challenge for the Company but is essential if we are to continue to provide capacity to meet the rapid growth we are experiencing.

The first planning permissions for the development of sites for port-related but non-core activities to be displaced from Dublin Port to Dublin Inland Port will be lodged during 2018 and it is anticipated that construction will be underway before year end.

With BREXIT due to occur in March 2019, and given the great uncertainty about what this will mean, we will during 2018 make the necessary preparations for the reintroduction of border controls in Dublin Port should that ultimately prove necessary.

Towards the end of 2018, we will commence a public consultation process on port infrastructure charges in a manner consistent with the Port services Regulation which comes into force in 2019. Port charges for the largest modes of cargo have not increased since the Company was corporatised in 1996. Given the high level of capital investment required, given the imperative to maximise the utilisation of the Port’s lands and given the existence of some significant anomalies in the Port’s charging structures, it is timely for a review of port charges to be carried out.

Finally, none of our development plans are possible unless we succeed in obtaining the necessary permissions and consents. This requires us to demonstrably manage and develop Dublin Port in accordance with the principles of proper planning and sustainable development. During 2018, we will continue our programme of initiatives to re-integrate the Port with the City across all of the areas we have been active in in recent years. These include the development of a Natural Capital Policy for Dublin Port and the continuation of a programme of heritage and cultural activities.